Mobile payments startup Square has formed an extensive partnership with Starbucks that includes a $25 million investment from the coffeehouse giant.
Under the terms of the deal announced this evening, Square will process credit and debit card transactions at U.S. stores. Also, Starbucks customers will be able to make purchases with Pay with Square -- Square's payer app -- at Starbucks locations later this fall.
In addition to investing $25 million in Square's fourth round of funding, Starbucks CEO Howard Schultz will join Square's board of directors. In June 2011, the company raised $100 million in series C financing, giving it an estimated value of more than $1 billion. The company's fourth round of financing hasn't been announced but is rumored to give Square a $4 billion valuation.
"The evolving social and digital media platforms and highly innovative and relevant payment capabilities are causing seismic changes in consumer behavior and creating equally disruptive opportunities for business," Schultz said in a statement. "Both Starbucks and Square take a similar approach when building products and running our businesses, and together we can bring the best possible payment experience to Starbucks customers."
The service, founded by Twitter co-founder Jack Dorsey, is being positioned as an alternative to the much-touted but still emerging near-field communication (NFC) technology. Square's system still lets you pay for goods and services using your mobile phone without the need for cash or a credit card. But instead of having users tap their phone against an NFC-enabled register or terminal, Square's system also lets users "check into" a store through phone, pick up items, and pay for them through Square account.
The partnership seems a natural, as Starbucks has been a leading retailer in embracing mobile payments technology. The Seattle-based coffee giant already has an app that allows customers to pay with their phones, locate stores, and check their reward points.